CFD Trading Rate Euro vs US Dollar (EURUSD)

Provided that 1.1015 is not breached, the weakness in EUR could extend to 1.0935 before stabilisation can be expected. In the longer run, further EUR weakness appears likely; the next two support levels to monitor are 1.0935 and 1.0900, UOB Group FX analysts Quek Ser Leang and Peter Chia note.  

Support levels to monitor are 1.0935 and 1.0900

24-HOUR VIEW: “The sharp selloff that sent EUR plunging to 1.0950 was unexpected (we were expecting range trading). Not surprisingly, after such a sharp decline, conditions are severely oversold. However, provided that 1.1015 (minor resistance is at 1.0995) is not breached, the weakness could extend to 1.0935 before stabilisation can be expected. The major support at 1.0900 is unlikely to come into view.”

1-3 WEEKS VIEW: “Last Wednesday (02 Oct), when EUR was trading at 1.1065, we noted the ‘rapid buildup in downward momentum.’ We were of the view that ‘this is likely to lead to EUR weakness, and the levels to monitor are 1.1030 and 1.1000.’ After EUR fell towards 1.1000, we indicated last Friday (04 Oct, spot at 1.1035) that ‘to continue to decline, EUR not only has to break below 1.1000 but also the next solid support at 1.0980.’ In NY trade, EUR easily broke below both support levels, reaching a low of 1.0950. Although conditions are oversold, further EUR weakness appears likely. The next two support levels to monitor are 1.0935 and 1.0900. On the upside, a breach of 1.1060 (‘strong resistance’ level was at 1.1090 last Friday) would mean that EUR is not weakening further.”

• EUR/USD remains on the backfoot near 1.0950 as the Fed is expected to follow a gradual rate-cut approach.
• US labor demand remained robust and wage growth increased in September.
• ECB’s Villeroy supported another interest rate cut on October 17.

EUR/USD struggles to gain ground near the key support of 1.0950 in Monday’s European session. The major currency pair remains on the backfoot as the US Dollar (USD) clings to gains near a fresh seven-week high, prompted by surprisingly upbeat Friday’s United States (US) labor market data for September.

The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, trades close to 102.50. 

The US employment report showed a resilient labor demand and strong wage growth. As per the report, the economy added 254K non-farm jobs, which was significantly higher than the estimates of 140K and the former release of 159K, upwardly revised from 142K. The Unemployment Rate decelerated to 4.1% from expectations and the August print of 4.2%. 

Upbeat employment data forced traders to push back market expectations for the Federal Reserve (Fed) to reduce interest rates by 50 basis points (bps) again in November. The Fed started its policy-easing cycle with a larger-than-usual interest rate cut by 50 bps in September.

Meanwhile, renewed fears of inflation remaining persistent after the release of the hotter-than-expected Average Hourly Earnings for September also expunged Fed large rate cut bets. Average Hourly Earnings, a key measure of wage growth, accelerated at a faster-than-expected pace to 4.0% year-over-year. Month-on-month wage growth measure rose by 0.4%.

For more clarity on the interest rate outlook, investors will focus on the US Consumer Price Index (CPI) data for September, which will be published on Thursday. 

Daily digest market movers: EUR/USD remains under pressure due to multiple headwinds

• EUR/USD remains vulnerable near 1.0950 in European trading hours. Apart from the upbeat US Dollar, uncertainty over the Euro’s (EUR) outlook has also kept the pair on the backseat. The Euro’s outlook has become uncertain amid increasing speculation that the European Central Bank (ECB) could cut interest rates again in its monetary policy meeting on October 17.
• Large dovish ECB bets for October have been prompted by growing risks that inflation in the Eurozone could stabilize below the bank’s target of 2%. Annual Eurozone Harmonized Index of Consumer Prices (HICP) decelerated at a faster-than-expected pace to 1.8% in September, according to flash estimates.
• The economic outlook of Germany, the Eurozone’s largest economy, is weak due to soft demand. The German economy is forecasted to have shrunk by 0.2% annually for the current year by the ministry, led by Robert Habeck of the Green party, newspaper Sueddeutsche Zeitung reported on Sunday. 
• Meanwhile, ECB policymaker and French Central Bank Chief François Villeroy de Galhau also emphasized the need to cut interest rates again this month, told to La Repubblica over the weekend. Villeroy said, "In the last two years our main risk was to overshoot our 2% target." "Now we must also pay attention to the opposite risk, of undershooting our objective due to weak growth and a restrictive monetary policy for too long," he added.
• On the economic data front, Eurozone Retail Sales expanded but missed expectations in August. Annually, Retail Sales rose by 0.8% after contracting by 0.1% in July. Economists expected Retail Sales to have grown by 1%. Month-on-month Retail Sales rose expectedly by 0.2%.

Technical Analysis: EUR/USD struggles near 1.0950

EUR/USD strives for a firm footing near the immediate support of 1.0950. The major currency pair is broadly under pressure as it has delivered a breakdown of the Double Top chart pattern formation on a daily timeframe. The above-mentioned chart pattern was triggered after the shared currency pair broke below the September 11 low of 1.1000.

The 14-day Relative Strength Index (RSI) slides below 40.00. A bearish momentum would trigger if the RSI sustains below the same.

Looking down, the pair is expected to find support near the 200-day Exponential Moving Average (EMA) around 1.0900. On the upside, the 20-day EMA at 1.1075 and the September high around 1.1200 will be major resistance zones.

• EUR/USD weakens to near 1.0965 in Monday’s early European session. 
• The bullish outlook of the pair looks fragile on the daily chart, with the RSI indicator holding below the midline.
• The initial support level is seen at 1.0881; the immediate resistance level is located at 1.1000. 

The EUR/USD pair trades in negative territory for the seventh consecutive day around 1.0965 during the early European session on Monday. The major pair remains under selling pressure amid the further upside in the US Dollar (USD). The recent US jobs data released on Friday has prompted traders to pull back expectations for 50 basis points (bps) Fed rate cut at the November meeting.  

According to the daily chart, the bullish outlook of EUR/USD looks vulnerable as the major pair hovers around the key 100-day Exponential Moving Averages (EMA). EUR/USD could resume its downside bias if it decisively crosses below the 100-day EMA. Additionally, the downward momentum is supported by the Relative Strength Index (RSI), which stands below the midline near 37.55, suggesting that the path of least resistance is to the downside. 

Decisive trading below the 100-day EMA at 1.0970 could see a drop to 1.0881, the low of August 8. The crucial support level for the cross emerges in the 1.0805-1.0800 zone, the low of July 9 and the round mark. 

On the upside, the 1.1000 psychological level will be the first upside barrier for the pair. Extended gains could see a rally to 1.1144, the high of October 1. A break above this level could pave the way to 1.1223, the upper boundary of the Bollinger Band.  

EUR/USD daily chart

• EUR/USD enters a bearish consolidation phase after last week’s downfall to mid-1.0900s.
• The USD preserves the post-NFP gains to a multi-week top and caps the upside for the pair.
• Bets for another ECB rate cut in October undermine the Euro and further act as a headwind.

The EUR/USD pair kicks off the new week on a subdued note and consolidates last week's heavy losses to its lowest level since mid-August touched in the aftermath of the upbeat US employment details on Friday. Spot prices currently trade around the 1.0975 region and seem vulnerable to prolong the recent sharp pullback from a 14-month top – levels just above the 1.1200 mark. 

The US Dollar (USD) stands tall near a seven-week top as traders further trimmed their bets for another oversized interest rate cut by the Federal Reserve (Fed) in November on the back of surprisingly strong US jobs data. The headline NFP showed that the economy added 254K jobs in September, surpassing consensus estimates by a big margin, and the Unemployment Rate unexpectedly slipped to 4.1%. This provided evidence of a still resilient US labor market, while higher-than-expected growth in the Average Hourly Earnings revived inflation fears, smashing hopes for a more aggressive policy easing by the Fed. 

In fact, the current market pricing indicates a nearly 95% chance that the Fed will lower borrowing costs by 25 basis points at the end of a two-day policy meeting on November 7. Adding to this, persistent geopolitical risks stemming from the ongoing conflicts in the Middle East assisted the USD Index (DXY), which tracks the Greenback against a basket of currencies, to register its bets week since September 2022. The shared currency, on the other hand, continues to be undermined by bets that the European Central Bank (ECB) will cut rates again in October on the back of easing inflationary pressures and economic slowdown. 

The expectations were reaffirmed by comments from ECB Governing Council member Francois Villeroy de Galhau, saying that the central bank will cut rates in October as weak economic growth raises the risk that inflation will undershoot the 2% target. This, in turn, is seen as another factor acting as a headwind for the EUR/USD pair and supports prospects for a further near-term depreciating move. Hence, any attempted recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

There’s a risk of EUR/USD dipping back to the 1.10 level in the coming weeks, Rabobank’s FX analyst Jane Foley notes.

ECB is likely to cut rates later this month

“Safe haven demand may play a role in supporting the greenback. In addition, US growth continues to outpace that of the Eurozone.”

“Recent signs that inflation is ebbing further in various Eurozone countries have supported expectations that the ECB is likely to cut rates later this month and this could weigh on the EUR.”

“Additionally, French budget concerns may highlight some of the structural issues in the region.”

The Euro (EUR) is expected to trade between 1.1000 and 1.0050. In the longer run, to continue to decline, EUR not only has to break below 1.1000, but also the next solid support at 1.0980, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR has to break below 1.1000 to continue falling

24-HOUR VIEW: “Two days ago, we expected EUR to ‘continue to weaken,’ but we pointed out that ‘any decline is likely limited to a test of 1.1030.’ After EUR dropped to a low of 1.1032, we highlighted yesterday that “the weakness has not stabilised, and EUR could edge lower but is unlikely to be able to break 1.1000.” Our view turned out to be correct, as EUR dropped to 1.1006, recovering to close at 1.1031 (-0.13%). While downward momentum is slowing and conditions remain rather oversold, there is no indication of a sustained rebound yet. Today, we expect EUR to trade between 1.1000 and 1.0050. Even if it can break below 1.1000, there is another major support at 1.0980.”

1-3 WEEKS VIEW: “On Wednesday (02 Oct), when EUR was trading at 1.1065), we noted the “rapid buildup in downward momentum.” We were of the view that this “is likely to lead to EUR weakness, and the levels to monitor are 1.1030 and 1.1000.” Yesterday, EUR broke below 1.1030, reaching a low of 1.1006. To continue to decline, EUR not only has to break below 1.1000 but also the next solid support at 1.0980. Looking ahead, the next level to watch below 1.0980 is 1.0935. Overall, we will continue to view EUR negatively as long as it remains below 1.1090 (‘strong resistance’ level previously at 1.1120).”

• EUR/USD trades with caution above 1.1000 as the focus shifts to the US NFP.
• A sharp expansion in the US ISM Service Prices Paid has renewed fears of price pressures remaining persistent.
• ECB Schnabel remained concerned about the growing economic risks in the Eurozone. 

EUR/USD trades in a tight range above the psychological support of 1.1000 in Friday’s European session. The major currency pair consolidates near 1.1030, while the US Dollar (USD) edges lower ahead of the United States (US) Nonfarm Payrolls (NFP) report for September, which will published at 12:30 GMT.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops slightly to 101.80. However, it holds this week’s sharp recovery from the yearly low near 100.10.

Investors will pay close attention to the US NFP report as it will likely influence the pace of the Federal Reserve’s (Fed) policy easing for the remainder of the year. Economists estimate that US employers hired 140K new employees, slightly lower than 142K in August. The Unemployment Rate is expected to remain steady at 4.2%. 

Average Hourly Earnings are estimated to have grown at a slower pace of 0.3% month-on-month from 0.4% in August, with annual figures growing steadily by 3.8%.

Looking at the CME FedWatch tool, traders appear to have already adjusted Fed rate cut expectations for November. The 30-day Federal Funds futures pricing data shows that the probability of a further cut in interest rates by 50 basis points (bps) in November has declined to 33% from 53% a week ago. Fed large rate cut prospects for November waned sharply after the upbeat ADP Employment Change data for September and JOLTS Job Openings data for August.

Meanwhile, growing risks of inflation remaining persistent have also forced traders to pare high Fed jumbo rate cut bets. Thursday’s ISM Services PMI report for September showed that its component Prices Paid – which indicates a change in input cost – surprisingly expanded at a faster pace to 59.4. The Services PMI – which gauges activities in the service sector that accounts for two-thirds of the economy – grew at a robust pace to 54.9 from the estimates of 51.7 and the August reading of 51.5.

Daily digest market movers: EUR/USD remains on the backfoot amid dismal market mood

• EUR/USD trades sideways near 1.1030 in European trading hours after finding temporary support near 1.1000 on Thursday. The major currency pair strives to end its five-day losing streak. However, the pair could face more pressure as dismal market sentiment and the growing Middle East conflict would continue to weigh on risk-perceived assets, such as the Euro (EUR).
• Conflicts between Iran and Israel deepened after the killing of Hezbollah leader Hassan Nasrallah, in retaliation to which Tehran launched hundreds of ballistic missiles on military bases in the Tel Aviv region.
• Meanwhile, growing speculation for the European Central Bank (ECB) to cut interest rates again on October 17 has sent the Euro on the backfoot. Market expectations for ECB rate cuts have increased due to deepening Eurozone growth worries and a decline in the continent’s Harmonized Index of Consumer Prices (HICP) below the bank’s target of 2% in September.
• ECB board member Isabel Schnabel, who has remained an outspoken hawk, expressed concerns over growth risks in a speech on Wednesday. "We cannot ignore the headwinds to growth," Schnabel said. She also remained confident about inflation sustainably falling to 2% in a timely manner, with softening labor demand and further progress in disinflation.

Technical Analysis: EUR/USD seeks to gain ground near 1.1000

EUR/USD remains on the backfoot near the psychological support of 1.1000. The near-term outlook of the major currency pair has weakened as it trades slightly below the 50-day Exponential Moving Average (EMA), which stands at around 1.1043.

The shared currency pair continues to hold the breakout of the Rising Channel pattern in the daily chart, which occurred in the third week of August. A fresh downside would appear if the pair breaks below the upper line of the pattern. 

The 14-day Relative Strength Index (RSI) has declined to near 40.00, suggesting a weakening of momentum.

Looking down, a downside move below 1.1000 will result in a further decline toward the 200-day EMA around 1.0900. On the upside, the 20-day EMA at 1.1090 and the September high around 1.1200 will be major resistance zones.

• EUR/USD continues to lose ground as the ECB is widely expected to deliver a 25 basis point rate cut in October.
• The risk-sensitive Euro struggles due to safe-haven flows amid rising geopolitical tensions in the Middle East.
• The US Dollar receives support as recent US data challenge dovish expectations for Fed monetary policy.

EUR/USD continues its losing streak for the sixth successive session, trading around 1.1030 during the Asian hours on Friday. Lower Eurozone inflation reading raised expectations of a rate cut by the European Central Bank (ECB) in October, which would mark the central bank's third reduction this year.

Earlier this week, the Harmonized Index of Consumer Prices dropped to 1.8% year-over-year in September, falling below the ECB’s 2% target and lowest since April 2021. Markets reflect a 95% probability of a 25 basis point rate cut this month.

The risk-sensitive Euro may face challenges as escalating geopolitical tensions in the Middle East impact risk appetite. US President Joe Biden mentioned that the United States is in talks with Israel regarding potential strikes on Iran's Oil infrastructure.

Israeli Prime Minister Benjamin Netanyahu warned that Iran "will pay a heavy price" for Tuesday’s attack, which reportedly involved the launch of at least 180 ballistic missiles at Israel, according to the BBC.

The EUR/USD pair depreciates as the US Dollar (USD) receives support from a better-than-expected US ISM Services PMI and ADP Employment Change reports, which challenged dovish expectations for Federal Reserve (Fed) monetary policy.

US ISM Services PMI rose to 54.9 in September, from 51.5 in August and exceeding the market forecast of 51.7. The ADP US Employment Change report showed an increase of 143,000 jobs in September, surpassing the forecasted 120,000 jobs.

• EUR/USD struggles to gain ground around 1.1035 in Friday’s early Asian session. 
• The US Services PMI came in better than expected in September. 
• The cautious mood and rising bets of another ECB rate cut weigh on the Euro.

The EUR/USD pair remains on the defensive near 1.1035 amid the stronger Greenback during the early Asian session on Friday. The cautious mood in the markets ahead of the key US economic data weighs on the major pair. All eyes will be on the release of US employment data, which is due later on Friday.

The upbeat US Services Purchasing Managers Index (PMI) released on Thursday provides some support to the US Dollar (USD). The Services PMI climbed to 54.9 in September from 51.5 in August, exceeding the market forecast of 51.7, the Institute for Supply Management (ISM) showed. 

Meanwhile, Initial Jobless Claims in the US rose by 6,000 to 225,000 in the week ending September 28. This figure followed the previous week's print of 219,000 (revised from 218,000) and came worse than the market expectation of 220,000.

Fed Chair Jerome Powell indicated this week that policymakers would likely stick with 25 basis points (bps) rate cuts going forward. The markets have priced in nearly 68.9% odds of a 25 bps Fed rate cut, while the chance of 50 bps reductions stands at 31.1%, according to the CME FedWatch Tool. 

The US Nonfarm Payrolls (NFP) on Friday could offer some hints about the US interest rate path. The US economy is estimated to see 140K job additions in September, while the Unemployment Rate is projected to hold steady at 4.2%. If the jobs report showed a weaker-than-expected outcome, this could prompt the central bank to consider cutting rates deeper, which might exert some selling pressure on the USD.

Across the pond, the European Central Bank (ECB) policymakers continue to hint that another cut could be coming in the near future. This, in turn, might undermine the Euro (EUR) against the USD. Kyle Chapman, FX analyst at Ballinger Group, noted, "Policy is far too restrictive given the tough macro environment, and a switch to consecutive rate cuts seems to be a given now that disinflation is in its late stages.

• EUR/USD is declining on Thursday as the Euro weakens on the back of a worsening growth outlook. 
• A stronger US Dollar is speeding its ascent amid falling market bets of another aggressive rate cut from the Fed. 
• USD is further strengthening from haven flows as the conflict in the Middle East intensifies. 

EUR/USD trades in the 1.1030s on Thursday, about a tenth of a percent down on the day as geopolitical risks increase demand for the safe-haven US Dollar (USD) while the Euro (EUR) weakens amid a gloomy economic outlook for the old continent. 

EUR/USD slides on tighter Fed, haven flows

EUR/USD opens Thursday on the back foot after closing lower for three consecutive days. A single Euro now will buy almost two cents less than it did at the start of the week.

The Euro is weakening after lower-than-expected inflation data for September brings the official headline rate of inflation in the Eurozone to 1.8%, the first time it has fallen below the European Central Bank’s (ECB) target of 2.0% in 39 months. The data increases the chances the ECB will cut interest rates more aggressively, which, in turn, would be negative for the Euro as it discourages foreign capital inflows.  

In the US, conversely, market bets are falling that the US Federal Reserve (Fed) will follow up their “jumbo” 50 basis points (0.50%) cut with an equal-sized cut in November, and this is supporting the US Dollar. 

Strong US jobs data is helping to reassure investors that the US economy will not experience a hard landing. JOLTS Job Openings rose to 8.04 million in August from a revised-up 7.71 million in July, and ADP Employment Change – an estimate of private payrolls growth – came out at 142K in September, beating the previous month’s 103K and expectations of 120K. Markets now await the US’s most important labor report, the Nonfarm Payrolls (NFP) scheduled for release on Friday.

Rising geopolitical tensions in the Middle East further support the US Dollar because the Greenback is viewed as a safe-haven in times of crisis, further weighing on the EUR/USD pair. Israel has stepped up its multi-front war against Iran and its proxies – Hamas, Hezbollah and the Houthi of Yemen. After Iran’s bombardment of Israel on Tuesday, fears are increasing that Israel will retaliate with targeted attacks on Iranian Oil installations and possibly even nuclear development sites. 

Europe faces an uncertain future 

The Euro is suffering because of a pessimistic longer-term economic growth outlook for Europe. On Wednesday, these concerns crystallized in a speech that President Emmanuel Macron of France gave in Berlin. Macron warned about the existential risks for Europe if it failed to invest in its future in order to stay competitive in a rapidly changing new world order headed by the United States and China. 

Europe, he said, was facing “an existential risk” unless it increased investment in innovation and Artificial Intelligence (AI), imposed tariffs to ensure a level playing field with subsidy-backed competitors, simplified complex regulation and integrated member states at a capital market and governance level. His speech echoed proposals made by former Prime Minister of Italy Mario Draghi in his recent report on EU competitiveness, which was similarly pessimistic in its conclusions. 

Technical Analysis: EUR/USD continues descent within long-term range

EUR/USD continues unfolding a down leg within a broad multi-year range capped by a ceiling at roughly 1.1200 and a floor at about 1.0500. 

EUR/USD Daily Chart 

The pair is in a sideways trend on all its key timeframes (short, medium, and long-term) and since it is a principle of technical analysis that “the trend is your friend,” the odds favor a continuation of this sideways trend, suggesting an elongation of the down leg currently unfolding.

Prices are currently trying to penetrate below support provided by the red 50-day Simple Moving Average (SMA) at 1.1044. A close below the 50-day SMA would help confirm more weakness. A close below the trendline and the September 11 swing low at 1.1002 would provide further bearish confirmation. The downside target for the leg currently unfolding is 1.0875, the 200-day SMA, followed by 1.0777 (August 1 low) and 1.0600 in an especially bearish scenario. 

Momentum, as measured by the Moving Average Convergence Divergence (MACD), is relatively bearish as the blue MACD line has crossed below the red signal line, suggesting more evidence the pair could be vulnerable to further weakness.

• EUR/USD continues to lose ground for the fifth straight day amid sustained USD buying interest.
• Diminishing odds for an aggressive Fed policy easing and geopolitical risks underpin the buck.
• Bets that the ECB will cut rates in October weigh on the Euro and exert pressure on the major.

The EUR/USD pair attracts sellers for the fifth successive day and touches a fresh three-week low, around the 1.1030 area during the Asian session on Thursday. Bearish traders now look to extend the downward momentum further below the 50-day Simple Moving Average (SMA) amid broad-based US Dollar (USD) strength.

Against the backdrop of the upbeat US JOLTS Job Openings survey, the better-than-expected ADP report on Wednesday pointed to a still resilient labor market. This, along with the Federal Reserve (Fed) Chair Jerome Powell's hawkish tone earlier this week, forced investors to scale back their bets for another oversized rate cut at the November FOMC meeting. Apart from this, the risk of a full-blown war in the Middle East assists the safe-haven Greenback to build on this week's goodish recovery from its lowest level since July 2023 and climb to a three-week top on Thursday. This, in turn, is seen as a key factor that continues to exert downward pressure on the EUR/USD pair. 

The shared currency is further undermined by increased bets that the European Central Bank (ECB) will cut interest rates in October after data released earlier this week showed that the Eurozone inflation fell to 1.8% in September, below the 2% target. ECB Governing Council member Martins Kazaks noted that risks to the economy have become more pronounced and the need for cautious monetary policy adjustments. This contributes to the offered tone surrounding the EUR/USD pair and supports prospects for an extension of this week’s sharp pullback from a 19-month peak.

Even from a technical perspective, acceptance below the 50-day SMA for the first time since early August could be seen as a fresh trigger for bearish traders and validate the negative outlook. Market participants now look forward to Thursday's economic docket – featuring the final PMI prints from the Eurozone and the US, followed by the usual US Weekly Initial Jobless Claims and the US ISM Services PMI. This, along with speeches by influential FOMC members, will drive the USD demand and allow traders to grab short-term opportunities around the EUR/USD pair.

• EUR/USD declined for a fourth straight day on Wednesday.
• Market sentiment keeps one foot in safe havens amid geopolitical uncertainty.
• Upbeat US jobs data limits hopes for further overweighted Fed rate cuts.

EUR/USD trimmed further into the bearish side on Wednesday, dragging Fiber bids further into the low end as markets grapple with an uncertain outlook on the Middle East and evaporating hopes for a follow-up jumbo rate cut from the Federal Reserve (Fed) in November.

This week's data show is purely US, with European datapoints strictly low-tier appearances from European Central Bank (ECB) policymakers. US Nonfarm Payrolls (NFP) loom ahead on Friday, and investors are gearing up for a high-impact print in US net job additions.

The US ADP Employment Change data for September exceeded expectations, with 143,000 new jobs added, surpassing the median forecast of 120,000 and the revised August figure of 103,000. Investors are now eagerly anticipating the official non-farm payrolls (NFP) report due on Friday to confirm these preliminary numbers.

Federal Reserve Chair Jerome Powell cautioned against interpreting the 50 basis point rate cut in September as a precursor to further aggressive rate adjustments. The Fed's Summary of Economic Projections (SEP) indicates a total of 50 basis points in rate cuts over the next several meetings. Market sentiment aligns with the Fed's projection, with the CME's FedWatch Tool showing a 60% probability of a 25 basis point rate cut in November, while 40% are still anticipating a larger 50 basis point cut.

In addition to the focus on Fed rate cuts, the domestic US manufacturing outlook is uncertain due to a strike by port workers affecting the movement of goods along the East and Gulf Coasts. Escalating tensions in the Middle East, triggered by Iran's missile strike on Israel in response to Israel's actions in Lebanon, are further contributing to market volatility. Investors are closely monitoring the situation to gauge Israel's response to the escalating conflict.

EUR/USD price forecast

Intraday price action has officially been trucked into the 50-day Exponential Moving Average (EMA), and despite a half-hearted showing from Fiber bulls, the pair remains on the north side of the key moving average. EUR/USD continues to churn in the 1.1050 neighborhood, but a notable lack of a technical recovery leaves short flows in control of the pair with sellers targeting the 1.1000 round figure.

EUR/USD daily chart

Euro (EUR) could continue to weaken; any decline is likely limited to a test of 1.1030. In the longer run, rapid buildup in downward momentum is likely to lead to EUR weakness; levels to monitor are 1.1030 and 1.1000, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

Levels to monitor are 1.1030 and 1.1000

24-HOUR VIEW: “We detected ‘a slight increase in downward momentum’ yesterday. We expected EUR to drift lower, but we held the view that ‘any decline is likely limited to a test of 1.1105.’ In a surprising move, EUR fell sharply, easily breaking below 1.1105. It also breached the major support at 1.1060, reaching a low of 1.1044. While oversold, the decline has not stabilised. Today, EUR could continue to weaken, but this time around, any decline is likely limited to a test of 1.1030. The major support at 1.1000 is unlikely to come under threat. Resistance levels are at 1.1085 and 1.1110.”

1-3 WEEKS VIEW: “Our most recent narrative was from last Thursday (26 Sep, spot at 1.1130), wherein EUR ‘has likely entered a range trading phase, probably between 1.1060 and 1.1215.’ EUR rose above 1.1200 last Friday and again on Monday, but on both occasions, it retreated quickly. Yesterday, we indicated that ‘while the price action supports our view that EUR is trading in a range, after retreating from the upper limit of the expected 1.1060/1.1215 range, it could now test the lower end instead.’ However, instead of testing 1.1060, EUR broke below this level and reached a low of 1.1044. EUR closed at a 3-week low of 1.1067, down by 0.60%. Downward momentum is building rapidly, and this could lead to further EUR weakness. The levels to monitor are 1.1030 and 1.1000. To maintain the momentum buildup, EUR must not rise above 1.1150, the current ‘strong resistance’ level.”

• EUR/USD extends losses due to the Euro’s weakness and increasing US Dollar strength. 
• The Euro depreciates due to lower inflation data; the Dollar benefits from strong jobs data. 
• An escalation of the conflict in the Middle East has further increased safe-haven flows to USD. 

EUR/USD is under pressure, trading in the 1.1060s on Wednesday, after the pair fell from 1.1135 on Tuesday, in a sell-off that amounted to a 0.60% one-day decline. 

Lower-than-expected Eurozone inflation data was partly responsible for the sharp decline. The bloc’s Harmonized Index of Consumer Prices (HICP) grew by 1.8% YoY in September, down from 2.2% previously and below expectations of 1.9%. Core inflation, meanwhile, came out at 2.7% YoY – one tenth below August’s 2.8% reading and also below expectations. 

The data indicates headline inflation has fallen back down below the European Central Bank’s (ECB) 2.0% target, and that core is on its way. It increases the chances that the ECB will cut interest rates further, which, in turn, is likely to lead to outflows and a weaker Euro. 

EUR/USD: declines exacerbated by stronger USD

EUR/USD was also pushed lower after a recovery in the US Dollar (USD) on Tuesday. 

The Greenback gained after the release of data showing a higher-than-expected rise in the number of job openings in the US, as measured by JOLTS Job Openings, which rose to 8.04 million in August from a revised-up 7.71 million in July, and beat expectations of 7.66 million.

The data is significant because of the Federal Reserve’s (Fed) recent shift to focusing on concerns around the labor market. This broadly offset weaker US manufacturing activity data as measured by the ISM Manufacturing PMI, which flatlined in contraction territory and missed expectations in September. 

EUR/USD also sold off amid an escalation in geopolitical tensions in the Middle East, which increased safe-haven flows to the US Dollar. On Tuesday evening, Iran fired about 200 missiles, including some ballistic, at Israel’s capital Tel Aviv in a revenge attack after Israel killed Hasan Nasrallah, the head of the Iran-backed militia group Hezbollah.  

More employment-related data on the horizon   

The main releases likely to impact EUR/USD on Wednesday are the Eurozone Unemployment Rate for August; US ADP Employment Change data for September and comments from Federal Reserve (Fed) officials, including Fed Governor Michelle Bowman and Richmond Fed President Thomas Barkin.

Technical Analysis: EUR/USD possibly beginning descent within multi-year range

EUR/USD has been contained within a broad multi-year range that has a ceiling  at roughly 1.1200 and a floor at around 1.0500. The pair is currently testing the top of the range but after multiple touches appears to be pulling back down.

EUR/USD Daily Chart 

EUR/USD is probably in a sideways trend on all its key timeframes (short, medium, and long-term) and since it is a principle of technical analysis that “the trend is your friend” the odds favor a continuation of this sideways trend, which in this case means move back down towards the range lows.

Prices now appear to be beginning a down leg. They have reached a key support level in the form of the red 50-day Simple Moving Average (SMA) at 1.1041, which is likely to slow the sell-off at least temporarily. 

For confirmation of the start of a proper leg down prices should break through the 50-day SMA, the trendline for the last up leg, and the September 11 swing low at 1.1002. A close below 1.1000, therefore, would provide strong bearish confirmation. The downside target for such a move would be 1.0875, the 200-day SMA, followed by 1.0777 (August 1 low) and then 1.0600. 

Momentum as measured by the Moving Average Convergence Divergence (MACD) is relatively bearish over the last few days and the blue MACD line has crossed below the red signal line, suggesting more evidence the pair could be vulnerable to further weakness.

• EUR/USD trades firmer near 1.1070 in Wednesday’s Asian session. 
• The US ISM Manufacturing PMI came in weaker than expected in September. 
• The Eurozone inflation dropped below the ECB target in September. 

The EUR/USD pair trades with mild gains around 1.1070 during the Asian trading hours on Wednesday. Meanwhile, any signs of rising geopolitical tensions in the Middle East could weigh on riskier assets like the Euro (EUR). Investors will keep an eye on the US ADP Employment Change data for September, which is due later on Wednesday. 

Traders are still assessing the chance of a jumbo rate cut by the US Federal Reserve (Fed) in November after Fed Chair Jerome Powell said the US central bank is not in a hurry and will lower its benchmark rate ‘over time.’ Financial markets are now pricing in nearly 37.4% odds of a 50 basis points (bps) cut in November, while the possibility of a 25 bps reduction stands at 62.6%, according to the CME FedWatch Tool. 

The downbeat US economic data on Tuesday undermines the Greenback. The US ISM Manufacturing PMI was flat at 47.2 in September, weaker than the expectation of 47.5. The report indicated a continued contraction in the US manufacturing sector. 

Across the pond, the Eurozone inflation eased in September, falling below the European Central Bank’s (ECB) target. The Harmonized Index of Consumer Prices (HICP) rose 1.8% YoY in September, compared to 2.2% in August, Eurostat showed Tuesday. This figure marked the lowest figure since April 2021. The eurozone economy may not be out of the woods yet, even though September's inflation rates are promising. The ECB cut the interest rates to 3.50% in September and has also hinted that another cut could be coming in the near future. 

The fears of a wider war in the Middle East could exert some selling pressure on the shared currency and boost safe-haven assets like the USD. Iran launched over 200 ballistic missiles at Israel and Prime Minister Benjamin Netanyahu vows to retaliate against Iran for the missile attack on Tuesday.

• EUR/USD tumbled 0.6% on Tuesday as risk-off flows drag Fiber down.
• Middle East escalations crimped already-hobbled investor sentiment.
• EU HICP inflation and US ISM PMIs broadly miss the mark.

EUR/USD tumbled six-tenths of one percent on Tuesday, finding a minor bounce from the 1.1050 level as geopolitical tensions and souring economic data crimp risk appetite flows, bolstering the Greenback and dragging the Fiber to its lowest prices in almost a month.

European Harmonized Index of Consumer Price (HICP) inflation ticked lower at a faster pace than expected in September. YoY core HICP inflation ticked down to 2.7% on an annual basis, while MoM headline HICP inflation swooned to just 1.8% in September, an even faster drop from the previous 2.2% than the forecast 1.9%.

Forex Today: The US labour market will be in the spotlight along with Fed speakers

European economic data will take a backseat for the remainder of the week as investors pivot to face Friday’s upcoming Nonfarm Payrolls (NFP) report. A trickle of meaningful-in-the-aggregate yet individually meaningless economic data litters the landscape on the road to Friday’s NFP jobs report, and investors are grappling with middling releases that are routinely missing the mark.

In September, the US ISM Manufacturing PMI remained at 47.2 for the second consecutive month, falling short of the expected increase to 47.5. Additionally, ISM Manufacturing Prices Paid dropped to 48.3, down from the previous 54.0, indicating a contraction. Shifting focus to US employment data, JOLTS Job Openings in August surged to 8.04 million, surpassing the revised 7.7 million from the previous period. Despite this, the increase in job openings may not directly translate into new hires as the ISM Manufacturing Employment Index for September declined to 43.9 from the previous 46.0, failing to meet the anticipated rise to 47.0.

Turning to geopolitical concerns, investor attention has pivoted towards the Middle East following reports of Iran launching a missile attack against Israel in response to Israel's recent incursion into Lebanon. The US has pledged to respond in support of Israel, leading to apprehension among investors about a potential rapid escalation of the conflict.

EUR/USD price forecast

Tuesday’s backslide saw Fiber price action come within inches of the 50-day Exponential Moving Average (EMA) near 1.1045. EUR/USD found some bids late in the day, but the pair remains firmly off-balance, entirely reversing the latest bullish push into yearly highs above 1.1200.

With highs slipping out of reach of intraday bidders, buyers are now on the defensive and near-term momentum is leaning increasingly bearish. The immediate near-term goal for bidding pressure will be to drag the bidding line back above the 1.1100 handle.

EUR/USD daily chart

Eurozone Manufacturing PMI was revised up in September to 45.0 (from 44.8) after Spain reported a solid gain and German and French data were nudged up marginally from preliminary reports, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Soft EZ inflation bolster October ECB cut bets

“Eurozone Manufacturing PMI was revised up in September to 45.0 (from 44.8). But generally soft activity data and weaker than forecast Eurozone CPI today (-0.1% M/M for September) are bolstering expectations that the ECB will cut rates again this month, with 23bps of easing now priced into swaps.”

“Wider EZ/US spreads (2Y bond spreads have widened 20bps since September 18th) have undercut the EUR and reinforced the ceiling on the EUR around the 1.12 area for now.”

“Another strong rejection of the 1.12 area this week leaves the EUR looking prone to a little more weakness at least in the short run. A weak close for the EUR yesterday (bearish outside range session) signals a firm top on the EUR on the daily chart. A push back to the lower end of the recent range to 1.10 (and major support) is likely to develop in the short run.”

• EUR/USD faces selling pressure as flash Eurozone annual headline HICP came in lower at 1.8% than estimates of 1.9% in September.
• The ECB is highly expected to cut interest rates again in October.
• Investors await the US labor market data for fresh interest rate guidance.

EUR/USD slides below the round-level support of 1.1100 in Tuesday’s European session. The major currency pair weakens due to further deceleration in the preliminary annual Eurozone headline Harmonized Index of Consumer Prices (HICP) below the European Central Bank’s (ECB) target of 2%, which has boosted market speculation for the ECB cutting interest rates again in October.

The report showed that the annual headline HICP inflation decelerated at a faster-than-expected pace to 1.8% from the estimates of 1.9% and August's reading of 2.2%. The core HICP – which excludes volatile items such as food, energy, alcohol, and tobacco – rose by 2.7%, slower than expectations and the August reading of 2.8%. Monthly headline HICP deflated by 0.1% in September, while the core HICP grew at a similar pace.

The ECB delivered the second interest rate cut of its current policy-easing cycle in September and is expected to cut again in October. The return of the annual HICP below 2% is not the sole reason for an increase in the ECB rate cut bets. The Old Continent is underperforming on various parameters, such as the labor market and overall economic activity. Therefore, more rate cuts are needed for the economic revival.

On Monday, ECB President Christine Lagarde acknowledged, “Some survey indicators suggest that the recovery is facing headwinds,” at the European Union parliamentary hearing in Brussels. "The latest developments strengthen our confidence that inflation will return to target in a timely manner," and "we will take that into account in our next monetary policy meeting in October," she added.

Daily digest market movers: EUR/USD weakens on US Dollar’s recovery

• EUR/USD remains under pressure as the US Dollar (USD) bounces back after traders pare Federal Reserve (Fed) large rate cut bets for November. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps above 101.00. According to the CME FedWatch tool, 30-day Federal Fund futures pricing data shows that the likelihood of the Fed reducing interest rates by 50 bps in November waned to 35.3% from 58% a week ago.
• Market speculation for Fed outsize interest rate cuts eased after Fed Chair Jerome Powell's comments at the National Association for Business Economics conference on Monday, which indicated that the central bank will reduce key rates by quarter-to-a-percentage in both meetings remaining this year. Powell said, "If the economy evolves as expected, that would be two more cuts by year's end, for a total reduction of half a percentage point more", Reuters reported.
• On the contrary, Atlanta Fed Bank President Raphael Bostic backed a second straight interest rate cut by 50 bps if the labor market data weakens unexpectedly. For fresh insights about the current labor market health, investors will focus on the United States (US) ADP Employment Change and the Nonfarm Payrolls (NFP) data for September, which will be published on Wednesday and Friday, respectively.
• In Tuesday’s New York session, the US Dollar will be influenced by the US ISM Manufacturing Purchasing Managers Index (PMI) for September and the JOLTS Job Openings data for August, which will be published at 14:00 GMT.

Technical Analysis: EUR/USD falls from 1.1200

EUR/USD drops sharply to near 1.1100 after failing to recapture the key resistance of 1.1200 on Monday. The major currency pair drops slightly below the upward-sloping 20-day Exponential Moving Average (EMA) near 1.1110, suggesting that the near-term outlook has become uncertain.

The long-term outlook of the shared currency pair remains firm till it holds the breakout of the Rising Channel chart pattern formed on a daily time frame near the psychological support of 1.1000.

The 14-day Relative Strength Index (RSI) edges lower below 60.00, suggesting momentum is weakening.

Looking up, a decisive break above the round-level resistance of 1.1200 will result in further appreciation toward the July 2023 high of 1.1276. On the downside, the psychological level of 1.1000 and the July 17 high near 1.0950 will be major support zones.

Euro (EUR) slipped amid broad US Dollar (USD) rebound. EUR was last at 1.1109 levels, OCBC FX strategists Frances Cheung and Christopher Wong note.

Resistance is at 1.12 double-top

“ECB speaks are also of interest. Lagarde told a parliamentary hearing yesterday that the suppressed level of some survey indicators suggests that the recovery is facing headwinds. She added the latest developments strengthen our confidence that inflation will return to target in a timely manner. We will take that into account in our next monetary policy meeting in October.”

“Daily momentum is not showing a clear bias while RSI turned lower. Risks remain skewed towards the downside. Double-top pattern observed – typically associated with bearish reversal. Support at 1.11 (21 DMA), 1.1030,60 levels (50 DMA, 23.6% fibo retracement of 2024 low to high). Resistance at 1.12 (double-top).”